US Owners’ Tax Reporting Requirements for Uruguayan Corporations | International Tax Attorney
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I’m an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I’m continuing a series of blogs from Montevideo, Uruguay and in this blog, I’d like to continue discussing what I started in the previous blog: US international tax reporting requirements for US citizens and US tax residents in general who engage in tax planning here in Uruguay who take advantage of the local territorial system of taxation.
In the previous blog, I discussed the issue of FBAR compliance; today I’d like to discuss the issue of business information reporting requirements concerning Uruguayan corporations owned by US persons.
It’s a huge topic and I am just going to outline the main things here to watch out for. First of all you have to determine how you are going to treat this corporation for US international tax reporting purposes. If you are going to treat it as a corporation and maybe by default it is a corporation; then, you will have a form 5471 requirement here in the United States, especially in the first year for sure. Otherwise, it will depend on whether this is a controlled foreign corporation or not.
The other possibility is to us the ‘check the box rules‘ to modify the default status of your Uruguayan company. If for example, it is a default corporation, you can use the check the box rules to treat the corporation either as a partnership, if that is a possibility, that is if you have more than one owner or a disregarded entity. If it’s a partnership, you are likely to trigger form 8865 depending on your specific circumstances and particularly your ownership percentage and in the case of a disregarded entity, we’re talking about Form 8858.
Besides that, we have to really focus on whether this is a controlled foreign corporation or not. The reason is because you have to understand that the controlled foreign corporation is going to be subject to various anti-deferral tax regimes like Subpart F rules or GILTI tax.
If it is not a controlled foreign corporation, you still need to worry about potential PFIC designation for your company. A PFIC (Passive Foreign Investment Company) is a very complex concept that in my experience only exists really in the United States and nowhere else. It is a concept that has huge US income tax obligations that are absolutely enormous, not to mention that it will make your life a lot harder if you have to use a default methodology.
If you would like to learn more about your US international tax compliance concerning ownership of an Uruguayan corporation, you can call me at (952) 500-8159 or you can email me at [email protected]
Thank you for watching, until the next time.
